Out of all the issues Strong Towns deals with, I’ve long found housing policy to be the most confounding. Housing policy is a difficult puzzle because we want it to accomplish so many competing objectives simultaneously. For example, we want housing to gain in value to help both families and entire communities build wealth, but we also want it to remain inexpensive so people can afford to stay and live in their neighborhoods.
In this way, gentrification is often simultaneously a solution and a problem. Many communities desperately need additional investment to improve conditions for their residents by bringing new activity and prosperity. But living in Seattle, I see how those same forces can empty people’s wallets as rents rise and a neighborhood’s success in attracting investment turns into a curse that banishes many residents from their homes.
Unfortunately, I don’t have a simple, elegant solution to the trouble with housing. What I do have are a few concepts that I hope can add to the conversation as we continue to try to sort through how to create communities that build wealth and host economically diverse neighbors. Specifically, I want to discuss induced demand, undervalued neighborhoods, and location.
Free market urbanists tell us that the solution to a lack of affordable housing is to build more housing. If we just keep building, eventually the supply will catch up with demand and prices will come back down.
But a peek at the dense dwellings of Manhattan makes clear that even a constantly growing housing supply is no guarantee of affordability. In fact, it seems the more Manhattan grows, the less affordable it becomes.
I have a suspicion that this is because great places actually increase demand for more people to live there. And what’s one of the core elements that makes a place great? Housing. Consequently, the more housing that is added, the greater the place becomes and the demand for even more housing continues to rise.
This induced demand is essentially the same as what we see with roads, where adding lanes fail to decrease congestion. I don’t think this means that we should stop building housing, but, if true, it suggests that we can’t build our way to affordability.
Strong Towns has again and again hit home that our communities’ neighborhoods producing the greatest economic value are frequently the ones we are investing in least. It’s a counterintuitive discovery, but too often, it's the simple truth: a city’s poorest residents are subsidizing its wealthiest.
As we think about housing, we must not repeat the mistakes of urban renewal initiatives from the past that wiped out vibrant communities and wealth by misidentifying them as slums rather than opportunities.
Of course, as the “Induced Demand” phenomenon shows us, investing in these communities can have complex impacts that simultaneously build wealth and displace people who can no longer afford to live there. But failing to invest through improved infrastructure and services to those most responsible for our own ability to invest — and most in need of investment — is an equally flawed approach.
Location, Location, Location
I don’t have a silver bullet to the core paradox created by these two observations: the failure of investment and the moral necessity of it. Like most complex challenges, I suspect the solution lies not in a single action, but in a series of incremental steps.
In this case, I think what form these steps should take may require us to zoom out and consider housing in a wider context. The dual problems of lack of affordability and lack of investment may simply not be solvable at the local level.
I believe that we must invest in our neighborhoods, even though the result will often be gentrification. We can mitigate this at the local level by treating housing as a sort of utility and providing publically-owned housing to maintain some economic diversity in our communities.
But long-term, I believe we must consider multiple locations rather than single neighborhoods or cities when thinking about the housing challenges of the current age. The reality is that we suffer from chronically under-invested in communities across our nation; put another way, practically speaking there are nearly unlimited investment-ready places. We don’t have an affordability problem as much as a location problem.
If we keep building desirable places (i.e. locations) everywhere, we may be able to create enough attractive communities that competition between them could bring prices down. This theory suggests that in many ways, it’s the rareness of great places that makes investment lead to induced demand and gentrification.
All of that said, I’m still not certain I’ve got it right when it comes to the trouble with housing, but I’m hopeful that if we all keep doing what we can to build strong towns, there will be enough strong neighborhoods for all of us.
(Top photo source: Baltimore Heritage)